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Dotcom Bubble

Stock market bubble in late-1990s

Dotcom Bubble

The dot-com bubble was a period of market growth fueled by the rise of the Internet, resulting in high valuations of new dot-com startups. Investments in NASDAQ rose by 800% between 1995 and March 2000, only to fall by 78% by October 2002. Many companies failed during the crash, while others survived through acquisitions.

Related

Hedge Fund Silicon Valley Silicon Valley Bank Collapse Internet Asian Financial Crisis Global Financial Crisis Dark Web Mark Zuckerberg Tulip Mania Salesforce

Timeline

Launch of the World Wide Web

The World Wide Web was launched in 1989, marking the beginning of the dotcom bubble's origins.

Federal Reserve drops overnight interest rate

The Federal Reserve lowered the overnight interest rate from over 9% in October 1990 to below 3% by December 1992, creating a significant impact on the economy.

Introduction of Mosaic Browser

The Mosaic browser was introduced in January 1993, marking a significant development in the user-friendliness and accessibility of the internet. It was created by the National Center for Supercomputing Applications and was the result of the collaboration between Eric Bina and Marc Andreesen.

TheGlobe.com Founding and Development

Two Cornell students started TheGlobe.com after purchasing an Apple internet server with $15,000 they raised over the 1994 Christmas break. They founded a programming company named WebGenesis and developed TheGlobe.com as their primary website.

TheGlobe.com Website Launch

TheGlobe.com was taken live on April 1, 1995, attracting 44,000 visits in its first month.

Alan Greenspan's Speech on Irrational Exuberance

In December 1996, Alan Greenspan delivered a speech on 'irrational exuberance' which ignited the momentum on technological growth and buoyancy, contributing to the dotcom bubble.

Taxpayer Relief Act of 1997

The Taxpayer Relief Act of 1997 dropped the marginal tax rates and capital gains tax rate, creating a favorable environment for capital flow into the markets and contributing to the inflation of the Dot-Com Bubble.

Launch of Priceline.com

Priceline.com was launched in April 1998, offering online customers the opportunity to name their price for unsold airline seats, resulting in cheaper flights for consumers and the sale of excess inventory for airlines.

Broadcast.com Goes Public

In 1995, Mark Cuban and Todd Wagner created AudioNet, which later became Broadcast.com. The company went public in July 1998, its stock price soaring 250% on its first day of trading, a then-record for newly issued public stock.

Dot-com Bubble IPOs

From October 1998 onwards, markets cheered the seemingly endless IPOs of dot-com firms without paying much attention to the viability of their business models, leading to a financial bubble inflating.

IPO of Cornell Students' Company

In November 1998, two Cornell students issued their IPO with a target price of $9 a share. The first trade soared to $87 a share, ending the day at $63.50 per share, resulting in a gain of 606% in one day.

Federal Reserve Increases Interest Rates

The Federal Reserve raised interest rates multiple times between 1999 and 2000, leading to a decrease in market enthusiasm and a shift of investments from speculative assets to safer interest-paying holdings like bonds.

Priceline's Initial Public Offering

In March 1999, Priceline went public at $16 a share, with its stock eventually reaching $69, resulting in a market capitalization of $9.8 billion, marking the most significant first-day valuation of an internet company at that time.

Investment Banker's Attitude Towards Profitability

In June of 1999, an investment banker expressed the prevailing sentiment among internet companies, stating that profitability was not a priority as it could negatively impact the valuation of an internet company. This attitude reflected the speculative nature of the market during the dotcom bubble.

Internet Stock Market Cap vs. Annual Sales

In October 1999, the market capitalization of 199 internet stocks tracked by Morgan Stanley's Mary Meeker reached a staggering $450 billion, while their total annual sales amounted to only about $21 billion. The collective losses of these companies totaled $6.2 billion, reflecting the unsustainable nature of the bubble.

Expansion of Priceline.com

By the end of 1999, Priceline.com was selling more than 1,000 tickets a day and attempted to expand into hotel bookings, car rentals, and home mortgages, with the intention of reaching ubiquity in every applicable market.

AOL Acquires Time Warner

AOL acquires Time Warner in a record $183 billion merger, marking one of the largest and most significant corporate transactions in history.

Dow Jones Industrial Average Peaks

On January 14, 2000, the Dow Jones Industrial Average reached its peak at 11,722.98, a level it would not return to for more than six years.

Peak of the Dot-com Bubble

The Dot-com bubble peaked on Friday, March 10, 2000, marking the climax of the stock market bubble that had ballooned during the late-1990s.

Economic Shock from September 11 Attacks

The economic shock from the terrorist attacks of September 11, 2001 further emphasized the decline of the dot-com era, as not a single IPO came to market in that tragic month, marking the end of an era.

Nasdaq Hits Bottom

The sell-off continued until October 2002, when the Nasdaq dropped to 1,114, down 78% from its peak, leading to the folding of a bulk of publicly traded dot-com companies and the evaporation of trillions of dollars of investment capital.

Nasdaq Index Fell to 1,139.90 Units

On October 4, 2002, the Nasdaq index plummeted to 1,139.90 units, marking a significant 77% fall from its peak during the dot-com bubble.

NASDAQ Crash Bottomed Out

The NASDAQ crashed by 78% over the next two years, finally bottoming out at 1114.14 on October 9, 2002. This marked a significant low point in the aftermath of the Dot-Com Bubble burst.

Dot-com Survival Rate in 2004

According to David Kirsch, director of the Dot Com Archive, 48% of dot-com businesses were still around in late 2004, although at lower valuations. He compared the dot-com survival rate to that of other technologies in their formative years.

Unused Broadband Capacity

As late as 2005, as much as 85 percent of broadband capacity in the United States was still going unused. This surplus capacity allowed for the development and roll out of new 'killer apps' to the masses.

High-Tech Industries Unemployment Levels Exceed Pre-Recession Levels

In 2008, certain high-tech industries surpassed the unemployment levels before the recession, with a 4% increase from 2001 to 2008. The recovery of the tech industry in Silicon Valley took longer, leading some companies to relocate production phases to lower-cost areas.

Rapid Growth of Websites

Around the year 2010, there was a significant increase in the number of websites, with an estimated 200 million websites in existence. This growth reflected the expanding influence and presence of the internet in various aspects of society.

Facebook's $19 billion purchase of WhatsApp

In February 2014, Facebook announced the acquisition of messaging service WhatsApp for $19 billion, raising concerns among business historians about the possibility of another tech bubble.

Nasdaq Reaches New All-Time High

After fifteen years, the Nasdaq stock market reached a new all-time high on April 23, 2015.

Nasdaq Regains Peak

It took 15 years for the Nasdaq to regain its peak, which it achieved on April 24, 2015, signifying a recovery from the dotcom bubble crash.

Investopedia joining Dotdash Meredith publishing family

Investopedia has become a part of the Dotdash Meredith publishing family in 2022.

End of the Timeline
Dotcom Bubble

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